2. The Nomination Committee: origin and evolution, regulations and composition

a. Origin and evolution

The Board of Directors resolved in the meeting held on 9 June 2015, following recommendation 48 of CBG, to split the Nomination and Remuneration Committee into two new committees: the Nomination Committee and the Remuneration Committee. Such split was conditional upon the approval by the Annual General Meeting of the amendment of the Articles of Association.

Subsequently, the Annual General Meeting held on 14 July 2015 approved the amendment of the Articles of Association in order to meet the latest regulatory development and to follow the recommendations of CBG, and consequently (i) the split of the Nomination and Remuneration Committee into two separate committees: the Nomination Committee and the Remuneration Committee; (ii) the composition of such new committees; and (iii) the regulations of each of them, were finally approved.

b. Regulations

Further to the update of Inditex’s internal regulations, approved by the Board of Directors on 9 June 2015 and by the Annual General Meeting on 14 July 2015, the Nomination Committee’s regulations are provided in article 29 of the Articles of Association, section 16 of the Board of Directors’ Regulations and more specifically, in the Nomination Committee’s Regulations.

More specifically, section 5 of the latter addresses the mission of the Nomination Committee:

“Without prejudice to other tasks it may be entrusted by the Board of Directors, and to other powers it may be reserved by these Regulations, the Nomination Committee shall have the following basic responsibilities:

  1. To evaluate the responsibilities, knowledge and experience required on the Board of Directors. For such purposes, it shall define the functions and qualifications required of candidates who must fill each vacancy, and evaluate the time and contribution required for them to effectively discharge their duties;
  2. To set a representation target for the least represented gender on the Board of Directors and to provide guidance on how to reach such target;
  3. To ensure that upon filling new vacancies or appointing new directors, selection procedures ensure the nonexistence of any manner of discrimination;
  4. To table to the Board of Directors the motions on the election of independent directors to be appointed through the co-option procedure, or to be submitted to the General Meeting of Shareholders, as well as the motion for the re-election or removal of said directors by the General Meeting of Shareholders;
  5. To issue a report regarding the motions to elect the remaining directors prior to their appointment through the co-option procedure or to be submitted to the General Meeting of Shareholders, as well as the motions for their re-election or removal by the General Meeting of Shareholder;
  6. To issue a report regarding the motions to appoint and to remove senior executives;
  7. Without prejudice to the responsibilities of the Lead Independent Director, should there be any, to review and arrange for the succession of the Chairman of the Board of Directors and of the chief executive of the Company and, where appropriate, to raise motions to the Board of Directors in order for such succession to take place in an orderly and planned manner.”

Meanwhile, section 6 describes the powers of the Nomination Committee regarding selection of prospective directors:

“With regard to the selection of directors, the Committee shall have the following main duties:

  1. To issue a report on the directors’ selection policy approved by the Board of Directors and verify on an annual basis compliance thereof;
  2. To set up and review the criteria that must be adhered to regarding the composition of the Board or Directors and to select the prospective candidates. For such purposes, the Committee shall define the duties and qualifications required of candidates that must fill each vacancy, based upon the requirements of the Board of Directors and the areas that need to be reinforced;
  3. To ensure that, upon filling new vacancies or appointing new directors, selection procedures shall ensure the absence of any manner of discrimination. Namely, to set a representation target for the least represented gender on the Board of Directors and to provide guidance on how to reach such target;
  4. To select the prospective candidates to be appointed, where appropriate, directors of the Company, assessing their required ability, qualifications, knowledge and experience and establishing the absence of any disqualifications or prohibitions and the circumstances required for them to qualify as a given class of directors and submit, therefore, its motions or reports, where appropriate, to the Board of Directors for their appointment through the co-option method or to be submitted to the decision of the General Meeting of shareholders;
  5. To issue a report on the motions that corporate directors may submit regarding the appointment of their representatives natural persons;
  6. To report on the appointment of internal offices of the Board of Directors and its Committees (Chairman, Deputy Chairman/Chairmen, Chief Executive Officer, Lead Independent Director, Secretary and Deputy-Secretary(ies));
  7. To propose to the Board of Directors such members that must sit on each Committee;
  8. To verify, where appropriate, the information provided in the Annual Corporate Governance Report about the reasons why certain proprietary directors may have been appointed, at the behest of any shareholders whose stake is lesser to the minimum stake that qualifies as significant under the prevailing regulations in force or why certain formal requests of presence in the Board of Directors made by shareholders whose stake is the same or higher than others at whose request proprietary directors may have been appointed, have not been attended; and
  9. Without prejudice to the responsibilities of the Lead Independent Director, should there be any, to review and arrange for the succession of the Chairman of the Board of Directors and of the chief executive of the Company and, to table, where appropriate, proposals to the Board of Directors for such succession to take place in an orderly and planned manner.

The powers regarding assessment and re-election of directors are included in section 7:

“With regard to the assessment and re-election of directors, the Committee shall have the following main duties:

  1. To establish and oversee an annual program for evaluating the performance of the Board of Directors, its Chairman, its delegated bodies and its supervisory and control committees. For such purposes, the Committee may gather such information and/or documentation as it may deem necessary or expedient;
  2. To take part in the annual process of evaluation of performance of the Chairman of the Board of Directors pursuant to the provisions of the Company’s corporate governance system;
  3. To report on an annual basis to the Board of Directors on the evaluation of the Board of Directors itself, the Committee, the directors, and of the performance of the chief executive of the Company;
  4. To verify, where appropriate, the independence of the advisor which assists the Board of Directors with the evaluation process;
  5. To examine, prior to the end of the term for which a director has been appointed, the advisability of the director’s re-election, as well as the director’s continuance, if applicable, on the committees of the Board of Directors of which such director is a member;
  6. To verify that the director to be re-elected continues to comply with the general requirements applicable to all directors of the Company pursuant to law and the Company’s corporate governance rules, as well as assess the quality of work, the dedication to office and the availability of the director in question during the preceding term of office; and
  7. To submit to the Board of Directors its motion (in the case of independent directors) or report (in the case of the remaining directors) regarding the re-election of director s by the General Meeting of Shareholders.”

Section 8 of the Regulations refers to the powers regarding removal and dismissal of directors:

“With regard to the removal and dismissal of directors, the Committee shall have the main duties of submitting to the Board of Directors the motion regarding the removal or, where appropriate, issuing a report on the motion of removal of directors by the General Meeting of Shareholders on account of the existence of grounds for resignation or dismissal pursuant to Statue or the corporate governance rules of the Company.”

Finally, section 9 addresses other powers entrusted to the Nomination Committee:

“Additionally, the Committee shall have the following main duties:

  1. To issue a report on the appointment and removal of the Internal Audit Director, after report of the Audit and Control Committee;
  2. To issue a report on the motions to appoint and remove senior executives;
  3. To issue such reports and carry out such proceedings that fall within its remit, pursuant to the corporate governance system of the Company, or which are required by the Board of Directors or its Chairman; and;
  4. To issue a report before the authorization or release by the Board of Directors of the obligations arising from the duty of loyalty of directors, when this does not fall within the remit of the General Meeting of shareholders.”

c. Composition

Pursuant to its Regulations, the Nomination Committee shall be made up of a number of non-executive directors no lesser than three nor higher than seven, the majority of whom shall be independent.

Members of the Nomination Committee, and namely its Chair, shall have the appropriate expertise, qualifications and experience to discharge the duties they are called upon to perform.

As at 31 January 2016, the Nomination Committee was made up of the following members:

Chair Mr. Emilio Saracho Rodríguez de Torres
Ordinary members Ms. Irene Ruth Miller
Mr. José Arnau Sierra
Mr. José Luis Durán Schulz
Mr. Rodrigo Echenique Gordillo
Mr. Carlos Espinosa de los Monteros Bernaldo de Quirós
Secretary (non-member): Mr. Antonio Abril Abadín

Four of the members sitting on the Nomination Committee are non-executive independent directors.

The résumé of all Committee members is available at the corporate website: www.inditex.com.

Detailed information on the Nomination Committee is provided in section A.2 of the Annual Report on Remuneration of Directors, available at www.inditex.com.

d. Proceedings

The Committee shall meet, at least once a year and every time its Chair calls it. The Chair of the Nomination Committee shall call a meeting thereof whenever the Board of Directors or the Chairman thereof would request the issue of a report be issued or the passing of motions, and, at any rate, whenever it is appropriate for the successful performance of its functions.

Ordinary meetings shall be called by letter, fax, telegram or e-mail and the notice shall be signed by the Chair or the Secretary. A quorum for Committee meetings shall be declared when at least half plus one of its members, present or represented are in attendance. Likewise, The Committee may also pass resolutions in writing, without holding a meeting pursuant to the provisions of statute.